Deposit Market Competition, Wholesale Funding, And Bank Risk

In this paper the authors revisit the long debate on the risk effects of bank competition and propose a new approach to the empirical estimation of the relation between deposit market competition and bank risk. This approach is based on the classical moral hazard problem of the bank: deposit market competition raises the optimal risk choice of the bank by raising the costs of bank liabilities. Since banks can substitute between retail and wholesale funding and the authors relate deposit market competition to wholesale market conditions and examine their joint effect on the risk of bank assets.

Provided by: Federal Reserve Bank of New York Topic: Software Date Added: Sep 2010 Format: PDF

Find By Topic